Removal of fuel subsidy in Nigeria is for the best, World Bank says
The World Bank has advised the Nigerian government to remove its fuel subsidy.
The rationale behind this tip is that fuel subsidy affects the government’s net revenue alongside crude oil theft.
This conversation took place on Thursday at the Nigeria Development Update and Country Economic Memorandum in Abuja.
Alex Sienaert, the World Bank’s new Lead Economist for Nigeria, presided over the forum, and detailed reasons why Nigeria should eliminate its fuel subsidies. He noted that oil revenue is on a downward trend despite the increase in oil prices.
“Despite the production pressures, production revenues have increased but PMS subsidies have increased, As a result, net revenues would be lower this year at N2.3 trillion than they were in 2020, it’s the main culprit.” He said.
The lead economist disclosed that the major reason why the oil revenue is declining is that the petrol subsidy in Nigeria continues to increase, for example, the subsidy recently jumped from N4 trillion to more than N9 trillion.
He acknowledged Nigeria’s effort in trying to boost revenue in its non-oil sector to reduce its dependence on oil but admitted that the idea has been enough to counter what they have seen on the net oil revenue side.
Alex Sienaert spoke about adopting a single and market-reflective exchange rate; increasing non-oil revenues by raising VAT and excise rates and strengthening tax administration as well as containing inflation by reducing the federal government’s recourse to CBN financing.
He also spoke on the Nigerian economy as a whole, urging the government to tackle its inflation problem through the reduction of the federal government’s recourse to Central Bank of Nigeria (CBN) financing.
According to the economist, the four things that could boost investment opportunities in the country include; facilitating trade, boosting access to finance, boosting power generation, and facilitating transport connectivity.
